USD/TRY recedes to 5.60 after testing daily highs

The Turkish Lira is depreciating vs. the Buck for another session and is pushing USD/TRY to weekly tops beyond the 5.61 handle, where some decent resistance has turned up.

USD/TRY vigilant on trade, data

The pair is up for the third session in a row so far today, managing to regain traction after bottoming out in four-month lows just below 5.45 on August 8. It is worth noting that the current positive streak is so far reversing three consecutive monthly closes in the red territory, with the Lira appreciating more than 12% since 2019 lows recorded in May.

In the meantime, the US-China trade war and its negative implications over prospects for the world growth continue to drive the sentiment in the global markets and keep the ‘flight-to-safety’ stance well in place in detriment of inflows into the EM FX universe (which have been supported as of late by looser monetary conditions in G10 economies)

Markets in Turkey are expected to resume the activity on Thursday evening following the ‘Festival of the Sacrifice’ holidays. In the domestic docket, the labour market report figures are due on Thursday along with Friday’s Industrial Production figures and Budget Balance results.

What to look for around TRY

The Lira met strong resistance in the 5.45 area so far, or multi-month highs vs. the Greenback. However, the current preference for safer assets in response to the US-China trade war has undermined extra gains in TRY for the time being. On another front, newly appointed Governor M.Uysal appears to have inaugurated an Erdogan-sponsored easing cycle following the recent interest rate cut by the CBRT. Whether this move was untimely (as regarded before the rate cut) it remains to be seen. In the meantime, TRY remains supported by the ongoing ‘hunt for yield’, as domestic rates still look attractive in spite of the recent cut. On the more macro view, the country needs to implement the much-needed structural reforms (announced in April) to bring in more stability to the currency and sustain a serious recovery in both economic activity and credibility.

USD/TRY key levels

At the moment the pair is gaining 0.87% at 5.6096 and a surpass of 5.6277 (monthly high Aug.1) would expose 5.7025 (50% Fibo of the February-May up move) and finally 5.7727 (high Jul.25). On the downside, the next support emerges at 5.4494 (monthly low Aug.8) followed by 5.3918 (78.6% Fibo of the February-May up move) and then 5.2918 (monthly low Mar.29).